Building to Sell Through a Crisis

April 17, 2020 |  

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Nashville-based Bryan Clayton was running Peachtree, a landscaping business, when the financial crisis of 2008 hit hard. Customers stopped spending money overnight. Clayton gathered his employees together and told them the world had changed and asked each to re-commit to the company. Clayton told them that the road ahead would be challenging, but he would do everything in his power not to cut staff.

To read a transcript of this episode, click here.

Nashville-based Bryan Clayton was running Peachtree, a landscaping business, when the financial crisis of 2008 hit hard. Customers stopped spending money overnight. Clayton gathered his employees together and told them the world had changed and asked each to re-commit to the company. Clayton told them that the road ahead would be challenging, but he would do everything in his power not to cut staff.

While many of his competitors went out of business, Clayton survived the 2008 financial crisis. He went on to build Peachtree into a 150-employee company which he sold to Lusa Holdings in 2013 for a seven-figure windfall.

There are some critical lessons in this episode for the aspiring value builder including:

Sell the benefit. Clayton was in the commoditized business of cutting grass, but when he approached commercial clients, he focused on what made their business model work. One of his first commercial contracts was with a McDonald’s franchisor who owned 40 stores. Clayton won the assignment by offering to clean the cigarette butts from the drive-through — a pain point no other landscaper offered to solve.

Get ready early. Asked what he would do differently, Clayton said he would invest a year getting the business prepared to sell.

You’ll learn a ton through Clayton’s attendance at the school of hard knocks, including:

  • Three ways to navigate a financial crisis
  • Why your assets may be worth less than you thought
  • Why you need to separate salespeople who hunt from those who farm
  • How to find self-motivated salespeople
  • Definitions for the alphabet soup that is M&A parlance including GAAP, IOI and LOI
  • How to avoid getting re-traded
  • The single most crucial negotiation trick Clayton wished he had known before selling

Getting through a financial crisis is a daunting prospect, and we’re here to help. Our community of Certified Value Builders are some of the most experienced advisors in the world. Most have run a business through the 2008/9 recession and can help you navigate the road ahead. If you’d like to set up a one-on-one discussion with a Certified Value Builder™ who has fought through some of the most challenging times in history, complete this form.

Our guest

Bryan Clayton is cofounder and CEO of GreenPal, described as Uber for lawn mowing, GreenPal matches homeowners with local lawn mowing services throughout the United States. You can find out more by clicking on Bryan's headshot. Before founding GreenPal. Bryan founded PeachTee Inc. a regional landscaping company in Nashville Tennessee growing that business from 0 to 150 employees and ultimately acquired by Lusa holdings in 2013. In his free time Bryan enjoys hiking , martial arts, long-distance running, and volunteering with Achillies international a group assisting in the training of disabled athletes for competitive events.

Transcript

John Warrillow:

As difficult as the financial crisis that we’re going through may feel right now there is one silver lining and that is that for a lot of businesses they will emerge from this period a much stronger business and unfortunately some of your competitors may not. This will be a reckoning for a lot of businesses that are not built to sell, that are too dependent on a single customer or haven’t figured out their cash flow model and as a result, we’re going to see businesses fail and if you’re one of the businesses that thrive and at least survive through this time, you’ll be much better placed to come out of it with a lot less competition. That’s exactly the place that Brian Clayton found himself in the 2008 crisis. He was challenged like never before in his company, but managed to bring his team together as he will describe on this episode and work through the crisis and ultimately built a sellable company, one that was acquired by one of the largest landscaping businesses in the United States. Here to tell you his entire story is Brian Clayton.

John Warrillow:

Brian Clayton, welcome to Built To Sell Radio.

Bryan Clayton:

Awesome. Great to be here.

John Warrillow:

Yeah, it’s great to have you. So tell me a little bit about the lawn care business because when I think of lawn care, I don’t think of a business. I usually think a guy with a truck, like a tractor or a guy with a push mower. I don’t think of it as a business to say, but you built a significant business here.

Bryan Clayton:

Yeah. So it’s an 80 billion industry in the United States and-

John Warrillow:

That’s incredible.

Bryan Clayton:

… 90% of it is probably dominated by what I call Chuck in a truck-

John Warrillow:

Chuck in a truck.

Bryan Clayton:

… Peter in a pickup. And so yeah, to your point, most of it is done by owner operators. It’s highly fragmented. And that’s mostly in the residential space. So somebody needing their lawn mowed once a week, once every two weeks, they typically get matched up with somebody who is an owner operator to come cut their grass for them. But there is a big industry around landscape maintenance around commercial properties, apartments, office parks, airports, things of that nature that require a little bit more economic resources to pull off. There’s some cashflow and equipment and some… so there’s a lot more of investment assets up front. So bigger companies do play in that space. And so…

John Warrillow:

Okay. And that’s helpful. And that’s where Peach Tree played in a commercial market?

Bryan Clayton:

We started off just me and a push mower and I would mow my neighbor’s yards and all through high school. And by the time I was starting college, I had five employees. And by the time I had got done with college, I had 25 people working for me. I realized, wow, I never really wanted to cut grass my whole life. That wasn’t what I was going to school for. But I started quickly realize, Man, I was making more money running this little business than I was ever gonna make going into the job market. So I just kept running with it and-

John Warrillow:

What were you making when you were finished college, what were you clearing in a good year as a 21 year old?

Bryan Clayton:

So it’s subjective because I was pumping every dollar I could back in the business. I took on no outside investors. And so if I had an extra 10 grand, I bought a truck. But to answer your question easily six figures and my counterparts that were also going to business school where I attended college at a state school here in Tennessee. I mean, they were starting… this was 2002, 2003. They were starting making 30 grand, 40 grand. And I thought-

John Warrillow:

Here you are six figures, like Nope.

Bryan Clayton:

You can be honest, didn’t love the business. It’s a hard business. It’s a tough, cutthroat industry, hard business to run, but I just saw better future for myself. Just being an entrepreneur, than I did going to work for somebody.

John Warrillow:

So how does it go from 25 guys cutting grass to… What was your shift or what was the trigger that shifted you into the commercial space?

Bryan Clayton:

Yeah, so it took me a long time to learn this stuff on my own. I was a young cat and I wasn’t open to feedback as much as I should have been. And so I had to learn a lot of this stuff through trial and error and, and over time learning how to delegate better, how to hire people better. And really kind of the inflection point would have been when I took on my first sales person and began to train them with how I sold the first million dollars a year in business and train them in my way. And then I was able to replicate that two, three, four, five salespeople over the next five years.

John Warrillow:

What was the secret you talked to them about selling?

Bryan Clayton:

For me it was very nuanced in terms of knowing the industry and knowing what my particular company did better than our competitors and communicating that throughout the sales process. And I could never really figure out in those early days if it was better to hire somebody with sales background experience or hire somebody with in the street experience. I never could find that silver bullet of somebody that had the cup, a combination of both. And I never really in over 15 years. I never really got to a point where I felt comfortable one way or the other. I had people that I started that came from both.

Bryan Clayton:

And for us, there’s so much nuance in the green industry, in the landscaping maintenance industry that it takes a long time to understand the horticultural piece of it, the business piece of it. The quality aspect of it. And taking out what I had learned over six, five, six years and putting that into my new sales person’s head was one of the hardest things I had to learn on my own in the early days. Well, it wasn’t until that point until we really started to grow.

John Warrillow:

Okay. So, I think a lot of business owners listening to this would be in the same camp. Either they thought about hiring sales people they’ve got a couple, maybe they’re underperforming. They’d love to get some tips and tricks. What did you find albeit by trial and error worked with hiring and training salespeople?

Bryan Clayton:

Yeah. The first thing I learned the hard way, was you can’t motivate anybody. You have to hire motivated people and make sure you don’t demotivate them. And I learned that the hard way. And I would hire somebody with 10 or 20 years industry experience and they worked for maybe a competitor. And I just thought maybe because they worked for this competitor who was crushing it, maybe they would crush it, bring them on. And I quickly realized, man I’m having to keep my thumb on them to make all of our cold calls or I’m having to extract stuff out of them, like pulling teeth just to get done, but we need to get done on a weekly or monthly basis. And I would stick with that person for months, years because I just felt like I had too much a sunk cost in them and it took me years to realize when I didn’t have the right person, that it was time to let them go and try to interview somebody else from that role.

John Warrillow:

How did you evaluate someone’s inner motivation? Like in interview like you and I are having right now, what would you ask them to measure their inner motivation or inner drive?

Bryan Clayton:

Yeah. There’s so much skill and finesse and nuance around that. Right. How do you, how do you find that out when you’re sitting across from somebody and, and how do you make sure they’re not blowing smoke? And for me, I would try to tie as much of our conversation around evidence as I could. Tell me about a time when you had no leads in a given week and how you just went out and hustled one up and how you closed the deal. Walk me through that. Tell me a story around that. And usually you can suss out if somebody has ever done that before because a good sales person will be able to do that. And as I hired probably, well into several thousand people over the 15 years running that business ended up with 150 when it was acquired and had a sales team of five or six at any given time.

Bryan Clayton:

So I got pretty good at it as time went on. But in the beginning, man, I really sucked. And the other mistake I made was in the early days when my support team was just me, a secretary, maybe one of the person. I’m hiring my first sales guy I made the mistake of having them be of account management and sales. And for years I suffered that because they were constantly being pulled between taking care of clients that they had relationships with and going out and hunting new clients. It wasn’t until 10 years in that I realized I had to have an account manager and had to have a sales prospect or had to separate those roles. Big mistake I made. It costs me a lot of growth and a lot of success. If I had figured that out, day one. If I had known then what I know now, I could’ve gotten done in one year what took me five.

John Warrillow:

Wow. So you’re a big believer, it sounds like in separating the roles.

Bryan Clayton:

For me in that business? Yes. Because you’re constantly… if your job is to go out and hunt new business, you’re always going to be letting the current business suffer.

John Warrillow:

How did you guys juggle as you move more to the commercial space? How did you juggle cashflow? Because I’m imagining commercial jobs now you’ve got bigger equipment, you’ve got guys who pay in 30, 60, 90 days as opposed to cash. When you show up the truck-

Bryan Clayton:

Very difficult.

John Warrillow:

… how did you manage that?

Bryan Clayton:

Yeah, very difficult business for cash flow because first off, it’s seasonal. So your costs spike-

John Warrillow:

I didn’t think of that.

Bryan Clayton:

… throughout the year. And secondly if you’re trying to run a business that big, the lawn mowing business is the best business in the world for a one or two man operation. But once you start trying to build a big business around it, there’s a big gap between here and here and it’s a long, hard road to get there. And cashflow is a big piece of that because the big boys or the multi-billion dollar companies can fund that time better than you can. And in larger companies, large commercial real estate owners take pride in how long they’re able to stretch out their vendors. They love to be able to sit on your money for 90 days. Meanwhile, you’re suffering trying to figure out how to pay the light bill and how to make payroll that week and they’re sitting on your money for 90 days.

Bryan Clayton:

And so the ability to do that is almost table stakes for a six figure contract or $1,000,000 contract. The ability to cashflow it throughout the years, almost the price to entry to play in that game.

John Warrillow:

So how’d you do it?

Bryan Clayton:

Well, I suffered through it and what kept me in business and kept me afloat was I built it debt free. So I didn’t have lease payments. I didn’t have mortgage or a quarter notes or truck notes or equipment payments. And I built that business only on the revenue that it generated. And so I didn’t have this huge outlay that I had to service whereas my competitors did. And so that was one way we were able to have a competitive advantage that we built over time was that we owned every piece of equipment we had.

Bryan Clayton:

And at one point in time probably had 300 lawnmowers that cost 10 grand and so be up to own those assets. And yeah it’s amazing how fast they go down in value. It sucks, but to own and repair and stretch out the life of those assets through things like preventative maintenance and having in house mechanics and things like that, we were able to forge a competitive advantage and be able to withstand the highs and lows of the cashflow. The other thing is it got me through the 2008 meltdown to I would’ve gotten wiped out had I had several hundred thousand dollars a month in debt service through that time.

John Warrillow:

Yeah, for sure. It’s interesting because a lot of people are right now dealing with another 2008. Right? The economic turmoil. As we record this, we’re in the throws of this COVID-19. What advice would you have for entrepreneurs who are going through, in their mind, the end of the world? They don’t know where they’re going to make payroll, they don’t know where they’re going to get their next chunk of cash. No customers are paying. Can you share an experience of what it was like for you in 2008?

Bryan Clayton:

Yeah. 2008 was rough in my business because it was tied a lot to new construction. It was tied to a lot to a commercial clientele that weren’t paying their bills. And what got me through that was being somewhat prepared for it, not being overextended, which is not good advice right now if you find yourself in this situation. But we had a good, strong company culture that I was able to rely on. And what I mean by that is we brought our entire family together, the 100 plus people working for us and said, “Listen, we’re going to do everything we can do to not miss payroll, but I’m going to need these three things from all of you. Basically for all of us, it means we’re going to all work twice as hard for less money. It sucks, but it’s what we’re going to have to do to get through this together. I don’t want to cut one person. I don’t want to cut one head. I don’t want to miss a check for anybody, but here’s what I’m gonna need from you guys and girls.”

Bryan Clayton:

And it basically boils down to working harder for less money and cutting hours and making sacrifices for the benefit of the whole. And if anybody’s not on board with this, I don’t know how long it’s going to take six months, a year. If you’re not on board, then I don’t expect you to go through this with us, but this is what it’s going to require. And whatever that is for your business. It could be, if you have people making $1,000 a week, it might be they only make $400 a week, but you’re going to service that throughout this period and you have to figure out whatever that number is.

Bryan Clayton:

The second thing is I’m actually a mentor at a place called the Entrepreneur Center here. And so I’ve been counseling quite a bit of guys and girls and some of them have this false hope that there’s a big bail out coming that Hey, listen, everybody’s is similarly situated. We’re all going to have to go through this. So I’m not really worried about it. And I’m sad to tell them that it’s not coming. The federal government is not going to make the payroll. Whatever assistance they’re going to be able to give you is so minimal. The United States government right now has been arguing in Congress with a referral over a week on trying to get $1,000 to everybody.

Bryan Clayton:

What’s $1,000 going to do to your average household? A week maybe? Whatever that looks like for them, that’s what your business bail out is going to be. So don’t place any false hope in that, that’s not coming. And then the obvious things, you got to figure out what are the expenses that you have to service that you cannot let go late. And that’s probably mortgages, rent payments, equipment payments, and then on down the list.

Bryan Clayton:

Third thing, your fourth thing, don’t roll over. Don’t give up. Fight until there is nothing left until there is no other option, no other card to play because this is your livelihood. You’ve spent however long building this thing. Fight until it’s all over. Because a lot of guys and girls are wanting to just roll over. And we’re three weeks into this thing. So, that’s my advice. Having gone through a similar situation in 2008. In 2008 a lot of people didn’t… this is affecting everybody, but in 2008, if you were in construction real estate and in any kind of business like that, it’s like somebody took a water faucet and turned it off, everything stopped. And so this was similar. If you were in those businesses, it’s almost identical.

John Warrillow:

Yeah. If you’re in a restaurant, I mean many businesses, but anything service is like zero. Yeah. So it’s very difficult. Well, I appreciate you sharing that. Having gone through it, it’s helpful to know there’s there’s also a light at the end of the tunnel. It does-

Bryan Clayton:

Always and a lot of your competitors aren’t going to be around when you come out of this and if you can survive, you will ride the next wave. That gives hope to entrepreneurs that can knuckle down and get through it.

John Warrillow:

That’s really well said. What is your… my attention? It’s something completely different. Which is how you differentiated your service from the other 50 guys and gals who cut lawn. So this is a commoditized business, right? Lawn care is very commoditized. So what did you do to make yourselves look unique?

Bryan Clayton:

Yeah. You nailed it. It can be looked at as a total commodity, especially somebody who’s making a decision in an office somewhere who’s never even seen the property that you’re talking about. A lot of properties particularly in Nashville, the market I was operating in, we’re owned by wealthy investors or conglomerates out of Chicago or New York. They’d never even been to these places. But they’re ultimately the ones that are, making a decision. So you had to look for ways to separate yourself in a commoditized service like ours. And really, it stemmed back from me having to sell my first commercial customer back in the days when I was just five or 10 people, I would still do sales. In fact, I would do sales out of the truck.

Bryan Clayton:

I would be running a crew, two guys mowing and I’d be making cold calls and I’d leave my crew working somewhere and I will run around and make cold visits. And one of the first commercial clients I got was McDonald’s and it was a huge contract for us. It was 40 locations throughout the Nashville, Tennessee area. And the thing that I was able to do to separate our service from the 20 other services that they could hire that were just like me, it was, I said, “Listen, when we come to service the property, every week we’re going to pick up every cigarette butt that is in the drive through because you don’t want your customers seeing that. If your customer looks down and at the drive through and they see that it’s full of cigarette butts, it’s going to turn them off. It’s nasty. And if they see a nice clean mulch bed there, they might supersize the meal or they might add Apple pie.”

Bryan Clayton:

And so I tried to figure out ways the to say, “Listen, we’re not cutting grass, we’re making you more money.” And that kind of thesis carried us on throughout the entire scope of that business was we’re not in the grass cutting business. We’re in the partnership business where we figured out ways for our clients help them make more money and hell, I mean, back then when we sold them, I was picking up cigarette butts and eventually I bought a grabber so I didn’t have to touch them. I mean I’ve done that and all the way to the last day of running that business, we picked up every cigarette butt and the drive through of every fast food clients that we had.

Bryan Clayton:

And so trying to figure out ways to align what it is we sold and did to making our client more money was something that we embedded in our sales process. And also use as a differentiator. Because when you change the conversation to go like that, we’re like an apartment manager. How do we help you take your vacancy rate from 10% to five? Well, here’s how we do it. We install better floral color at the leasing office. Where is the the show apartment where you take everybody through?

Bryan Clayton:

Okay, here’s the design for seasonal color to go there and here’s when we can make that corner of the complex look better. So when you walk your perspective client or tenant through there, may be your close rate goes up by 5%. Let’s try it, talking about those things rather than, “Hey, we’re the cheapest grass cutting service you can hire,” was a philosophy that carried us throughout how we ran the business and how we sold new customers.

John Warrillow:

And how big did you get this company in terms of revenue or number of employees, whatever proxy you want to use for such?

Bryan Clayton:

It was 150 people, eight figure business. It was one of the largest landscaping companies in the state of Tennessee, still is. And when it was acquired in 2013, that was the largest acquisition of that nature in the industry that year. And probably for five years before that too. It’s probably been eclipsed and I know it has since then, but it was consolidation doesn’t happen a whole lot in that industry. But it was a big deal in the industry when our company was bought and in my town in Nashville, I was the only… because that’s the dream of anybody that owns one of these businesses. And I was the only one that had gotten that kind of thing done for a decade. And no company had ever been bought in our industry, in our market. So that felt good to be able to get it done because it was hard.

John Warrillow:

So you aspired to sell, you never thought, okay, I’m going to have this business and hand it to my kids or that was part of your long term goal?

Bryan Clayton:

Man. I would love to tell you that I groomed this thing for acquisition from the start or even five years before it was bought… Built to Sell I love your book. And I wish I had read it when I started that business or maybe even the way that would have helped me a lot. And in fact, I didn’t even read it. And so I was like in the trenches of selling this business and what I realized was, “Holy crap, I didn’t build this company to sell.” It was too late. Well and I mean we had a lot of systems in place and it wasn’t like it was… I mean it got bought, right? So obviously it was in such a way that it could be bought and bolted onto a bigger company.

Bryan Clayton:

But if I had known all those things, I could’ve done a lot of things differently. So I had made the decision, but from the time I made the decision that, listen, I have taken this company as far as I can, Oh, there’s a lot of interesting things going on in technology right now. I want to explore those. I want to sort of new business. From the time I made that decision to the time that I sold that company was about a year and a half. And a lot of that long time window of lag, I guess you could call it was because my company was not prepared in many ways just from a accounting standpoint, our financials were not in GAP.

John Warrillow:

GAP in generally accepted accounting principles that accountants kind of speak about?

Bryan Clayton:

First time I’d ever heard that term was when the CFO for the company acquiring mine, $100 million plus outfit acquiring my company. I was like, “Have you seen gap? What is that?” I didn’t even know, so you probably know that and so and so there’s a lot of things I had to learn on the fly selling that company that if I could have done it differently, he could have done it in half the time. Maybe even gotten more money.

John Warrillow:

Right. So let’s go through, if we can, those 18 months. So what did you do to really get the business kind of ready to sell? Like what were some of the changes you had to make, the tactical things that you did to get it ready to go to market?

Bryan Clayton:

Yeah, Hundreds of things. The ones that stand out, is I had to shift my thinking to try to figure out a way to get this business to run without me. And while I had tons of employees, mid level managers, salespeople, HR. I had all kinds of people around me. What I had learned was that this whole business was this basically scaffolding around me and I was at the center, take me out, the scaffolding collapses. And every day running that company was almost organized chaos. And it was me putting out fires all day, every day, six, seven days a week. And I just thought that was normal for running a business of that size. And in many times it is. But over time I was able to, okay, how do I figure out how I never have to tell the lady that answers the phone, the answer to this question ever again.

Bryan Clayton:

And constantly going through those cycles of, okay, how do I remove myself from this? What kind of system or process can I put in place to remove myself from this? And a book that helped me was The 4-Hour Workweek.

John Warrillow:

Oh yeah.

Bryan Clayton:

Splashy title, total BS. You can’t work four hours a week and be successful. I don’t think. And I think Tim Ferriss probably believes that too. But the book is great because it helps you really think about how to streamline every little thing that you can. And that book helped me think through a lot of things. And so over time I was able to do that and remove myself and just even stuff like, like cleaning up our customer relations management software, CRM, we had one but it was junk and not everybody was in there.

Bryan Clayton:

And we had to really clean that up. A lot of stuff like that to get groom, the business that should have already been in place. But I was rushing to get it all cleaned up to get it sold.

John Warrillow:

And so when you had some of those things done, what was the next step? Did you take it to market yourself? Did you get approached? Like how did you start to proactively sell it?

Bryan Clayton:

Best decision I made was I worked with a broker that made his entire livelihood in my industry. It was a boutique operation, him and a couple helpers and he had made a name for himself in my industry in terms of blogging about it. And-

John Warrillow:

Go ahead and give him a shout out. What’s his name?

Bryan Clayton:

… Ron Edmonds with Principium Group. Man that was six years ago. And I can still remember his name, Ron Edmonds with the Principium Group.

John Warrillow:

Fantastic.

Bryan Clayton:

And he helped in terms of getting the business groomed because he’s like you’ve got to have X, Y and Z. And where he really shined was the interest reaching up because he had to roll the decks and the interest generating the interest and the business. And he took us through the whole process, helped us get everything cleaned up, helped us put the deck together. He put the deck together but, but guided us through that. And then he did all of the outbound and outreach to get interested parties. And without him we wouldn’t have gotten the deal done. There’s just no doubt about it.

John Warrillow:

What did you think the company was worth? Is he telling you kind of multiples of profits?

Bryan Clayton:

He’s managing expectations. Yeah, for us, at the time, 4x EBITDA was pretty standard. And that’s what we were expecting as that’s what we were that’s what we were in the game for. But as you pull all of this stuff together, you understand that, that’s a sliding scale because there’s a million ways to slice that. And so if I could have done it differently, I would have had a four to five year exit plan in place to where I would have made those numbers look as good as I could, but there were some years that I would run the business in such a way to not show a lot of profits. Maybe I might buy a bunch of new equipment and 179 it or-

John Warrillow:

What does it mean to 179? I’m not familiar with that expression.

Bryan Clayton:

It means like let’s say you buy a… for us, a big purchase we would make is like a $300,000 machine that blows a mulch everywhere. Buy that, and you can expense it all the first year and that reduces your overall tax burden.

John Warrillow:

Sure.

Bryan Clayton:

Well that doesn’t make that year look too great sometimes. And so things like that, that if I had done things differently I could have made the business look more profitable than it had been on that year. But I didn’t have that. I didn’t plan for five years to sell this business. The notion kind of just hit me out of nowhere. I had been doing it 15 years and I just felt like it was time to do something different with my life, to be honest. And so that cost me a lot in terms of the ultimate sale. If I had spent four or five years doing it, I could have had a much better outcome. And so learning that as you go through and as you prepare your financials, you start saying, “Man, I wish I’d done that differently but it’s the first time I’d ever done anything like that.”

John Warrillow:

Yeah. But that makes good sense. So Ron’s out there sort of kind of marketing the business. Did you guys get some letters of intent, some offers or what was the reaction?

Bryan Clayton:

Yeah, we had five different groups sign LOIs and of the five, four came in, met with us at our facility and we pared that down to two and then we ended up engaging and the letter of intent would be the first step. But then when you engage one buyer and you sign on the dotted line with them and they start due diligence. We made our decision to go with Lusa Holdings because they just seem like a better fit. They weren’t the highest bidder, but they seem like a better fit in terms of our culture. Culture was a big part of that business. The people that worked for me were my family, and so I really wanted to make sure those folks had the best opportunity going forward and Lusa had that. They had a better culture in place than the other options. And as it turns out, that was the right call.

John Warrillow:

Got it. Yeah. Just some of the industry lingo, letter of intent, it usually includes a no shop clause where you sort of getting gauged. You can’t keep shopping the business to the rest. Whereas-

Bryan Clayton:

Yeah, right.

John Warrillow:

… indication of interest maybe is [crosstalk 00:32:46].

Bryan Clayton:

Yeah. IOIs, we had five of those and then we signed one LOI about two months later.

John Warrillow:

Got it. Okay. And so what was your reaction to the IOIs? In your mind, you’re kind of thinking four times EBITDA is kind of the ballpark you’re hearing in the industry. What was your reaction when you saw the four offers come through the four IOIs?

Bryan Clayton:

Yeah. I got some good advice when I started the process was to manage my own psychology. Not to get too excited because these things change. And not to get dollar signs in your eyes to really kind of just have a calm outlook throughout the entire process. And so when I got those IOs some were… a couple were really low, almost insulting but I didn’t let that affect me. And the two higher ones were kind of what I was expecting. It wasn’t a shock one way or the other in terms of like, “Oh, wow, I’m going to sell this company for this price. Awesome.” It was, “Okay, I can accept this and let’s get it done.”

John Warrillow:

How are your assets treated? Because you had trucks and these leaf blowers, it costs 300 grand a year. You have lots of equipment.

Bryan Clayton:

Right.

John Warrillow:

You mentioned that the sort of going rates is roughly four times, and that was what you were led to believe 4x EBITDA. Is that plus this equipment or is the equipment sort of something you got to hand over?

Bryan Clayton:

Yeah. That was one of the surprising things that I kind of had to learn the hard way while going through this. So the equipment for all practical purposes, was just handed over. All any acquirer cared about was how much money do you make and we’re going to roll that through our formula. That’s it. We really don’t care about all the fixed assets that you have. So in my head I was like, “Man I got all of these money tied up in all these assets, but none of these guys really care about it and I kept punching that up.” Like, have you seen how much metal we own around here? How much iron is in our yard? Like, have you seen it? Let me show it to you again. Let me give you the grand tour, literally that that was going through my mind because I’m so proud of this stuff. When you’re in construction and landscaping, a lot of times man, you conflate success, how much crap you buy.

Bryan Clayton:

And I’ve been guilty of that. And so they didn’t care. They didn’t care that I had built this fleet of 80 trucks, all cash. They just looked at it like it was worn out junk and honestly to them it was because they sold all of it the day they bought it and put their own stuff in because they have a system. So, that was humbling. But the way I reconciled it was, “Look, if you had a car note or a truck note or equipment note on every one of these pieces of equipment, you wouldn’t have a business to sell because whatever you’re going to sell it for, you’re just going to turn around and probably give half of it to the banks to pay all this crap off.” And so that’s the way I reconciled it was, “Man you took 15 years to build this business and you did it all debt free. And it was because I took that path was one of the main reasons why I had a business that I could sell.”

Bryan Clayton:

I speculate that a lot of my competitors in this market and in this, in this industry couldn’t sell their businesses because they had tons of debt. They might have a $5 million business or $10 million business, but they got $10 million in debt and the buyers don’t assume that debt, not in our industry. That’s cleaned up at the sale. So that was how I felt better about that in my head, but no, they didn’t care a bit about it.

John Warrillow:

Yeah. It’s the difference between an asset sale where you’re selling just the stuff, the assets versus the goodwill that you’re selling. It meaning a multiple of earnings in this case? What was the most surprising thing for you in going through the next phase of the process? So from letter of intent, where you signed saying yep to the actual check, exchanging hands.

Bryan Clayton:

Yeah. For me it was how hard the due diligence process was.

John Warrillow:

What made it hard?

Bryan Clayton:

It was just lik it was 10 times harder than I thought it would be in terms of every I dotted and every T crossed. Now it could be that the CFO for the company that bought my business was just a real, real thorough guy. And this could have been an edge case, but from what I hear, these guys are all pretty well the same.

Bryan Clayton:

But this guy came in and sat in our office for a month just the poured over documents poured over the financials, poured over every… left no stone unturned and looked at every corner of the business. I mean, I remember one night we were in the office till like 11:30 at night looking for a canceled check because he had to verify that a bill was paid. He needed to look at the canceled check. And we couldn’t find the check and we spent two hours looking for a check that was for a few hundred bucks. So there was just tons of that. Now it could be this guy was overly zealous about his job, but he did a really good job in terms of the due diligence, which made it really difficult for us and not fun.

John Warrillow:

And in retrospect, having a few years under the bridge, do you think that was in an attempt to what industries you could call re-trade-

Bryan Clayton:

Absolutely.

John Warrillow:

Meaning manufacture things so they could kind of justify lowering the price?

Bryan Clayton:

Absolutely. Yeah. That was a tactic. And that did happen. All the way up until midnight of the closing day. And we almost walked away from the deal because there were a few sliding scales in terms of how much we had in accounts receivable, how much accounts payable had been cleared. All sorts of fluid parts of the deal that were argued about all the way up until midnight of the drop dead date and most stressful and difficult thing I’ve ever been a part of. Got it done. But yeah, that happened.

John Warrillow:

And what advice would you have for a fellow entrepreneur about to go through the process of selling their company?

Bryan Clayton:

Set expectations better. Don’t start this process until you’re in a better position in terms of selling the business or continuing it on. If you are selling the business and you have made up your mind, that’s all you want to do, then you’re going to be in a very disadvantaged position. In every phase of the deal of the process from in terms of upfront negotiations to all of the retraining that goes on during due diligence, you’re going to be at a disadvantage because you’re not willing to walk away. And so you have to start this process to where I’m doing well? Business is crushing it. I’m making money I enjoy doing it, but maybe I might sell it.

Bryan Clayton:

We’ll see what happens. And at the end of the process, you’re happy if you do, you’re happy if you don’t, that’s the best place to be when you start this process because if you’re married to the notion of getting it sold you’re going to be in a tough spot when it comes to all facets of the negotiation of it. That was my experience anyway. I really wanted to get that deal done and so I buckled a lot. I shouldn’t have.

John Warrillow:

That’s really important advice. It does sound like you were at least… I don’t want to put words in your mouth, but it feels like you sort of got to the point where you were done. You want to move on and you had other things you wanted to go do.

Bryan Clayton:

If I had to go back and run the business and if it didn’t materialize, then fine, but I wouldn’t have been happy about it.

John Warrillow:

Yeah.

Bryan Clayton:

And I think experienced negotiators, they do this 100 times more than you do. Experienced negotiators smell that and they will make you pay for it. And so that’s my advice. First off, spend a year, two years, three years getting ready for this. Start in a healthy position. Start in an equitable position to where you’re fine if it happens, fine if it doesn’t, and then do the journey.

John Warrillow:

Yeah. Great advice because you’ve now got a do over. So tell me a little bit about the new business GreenPal, because this is a cool business.

Bryan Clayton:

Took everything I’ve learned 15 years in the landscaping maintenance business and applied it to technology. And so GreenPal is the Uber for lawn mowers. Homeowner needs their grass cut. They just jump on the app or the website, they get five quotes back in 60 seconds. They hire the lawn care service they want to work with. They read reviews, they can see all kinds of data about the lawn businesses they choose from. Lawn company comes out and mows it, pay them right through the app. And so it’s everything I saw that was wrong with the industry being in it my entire life and applied it to an app that can make it so much easier for people that need the service. And for your smaller operators that make their living in this industry.

John Warrillow:

I love that business idea. It’s great because I’m in the camp so I’ve got kids and sometimes I convince them to cut the lawn. Other times I don’t. Other times I do it. And the idea of be able to just go on an app? What did you have to drop to build the app? Like how much we talk of is this thousands, tens of thousand, hundreds of thousands?

Bryan Clayton:

So in 2014 when I was part of a team building it, none of us knew the first thing about technology, none of us knew about how to build software, how to design software. Everything I had done up until that point was blue collar entrepreneur and I underestimated how different being a tech based company is from a traditional company. It’s just the worlds are totally different. And so the first version of the app, we paid a shop to build it. It was 120 grand and within six months we had to scrap it.

John Warrillow:

Oh no.

Bryan Clayton:

It was a total piece of crap. It was buggy, didn’t work, a bit confusing, nobody knew how to use it. We only had a handful of users after a year total disaster. And so it was basically $120,000 less that we had to learn. And so luckily I had two co-founders, we were able to retool and really educate ourselves on how to build software, how to design software and how to do that the correct way. And over the course of a year after that, we released the second version that we built and we had much better footing to grow and build off, of that.

John Warrillow:

And what are the biggest differences between running a technology company versus as you say, blue collar business? What do you see as the biggest differences?

Bryan Clayton:

Tons of differences. One there’s no… so when you’re inventing a new product, which is basically what GreenPal is, didn’t exist. You’re inventing something that didn’t exist and bringing it to life, there is no playbook. There is no game plan that you can rob and steal from for what you’re doing. So you have to figure it out. As you go through a very iterative process, you’re trying things. It doesn’t work over and over and over again until you kind of find the way. One of the things I did when I was building my first company was I would go to trade shows, and I would try to meet with the largest landscaping company in that city and tour their facility and they oftentimes would let me. And so I was able to look at that and say, “Okay, this is just a $40 million operation look at the things they’re doing.” I’m like, “That’s a great idea,” and import those to my business.

Bryan Clayton:

When you’re inventing a new technology product, there really isn’t that analogy… there isn’t that similar thing that you can pull from. And so for me, that was one of the surprising things like I had in my head when we first started, this is what it is. We’ll just build it and we’ll be done. Here we are six, seven years in this, and what you come to find out is it’s never done. You’re always making it better. You’re always learning new things. You’re always putting in new features, you’re always building on it. So that’s one of the things that makes it more challenging but also in a way kind of makes it easier in a way because every problem you have can be solved with technology.

Bryan Clayton:

So when I was running my traditional analog business, there was just a lot of problems that couldn’t be solved through any other way but hand to hand combat just getting in the trenches and getting your hands on it. A truck is literally gone off the road and it’s two feet from a riverbank and it’s about to go in the river. How do you deal with that problem? There’s no technology that’s gonna solve that problem. Fast forward to my business now almost every problem we face there is a technological solution that we can do to fix it to where it doesn’t ever happen again. And so that’s one of the big differences that makes it easier in a way, but also harder in terms of inventing the game plan as you go.

John Warrillow:

Yeah. Well I wish you all the best with GreenPal. I think it’s an amazing app. Where can people… two things I’d love to wrap up with, number one, where can people find out about GreenPal? I’m assuming the app store, but tell me otherwise.

Bryan Clayton:

App store, yes. Search it in either App store, GreenPal and then the website, YourGreenPal.com. You want to email me? My name is Bryan, B-r-y-a-n @yourGreenPal.com.

John Warrillow:

Awesome. Okay. Well that knocks it out of the park. So the app is called GreenPal, Google play or the app store-

Bryan Clayton:

That’s right.

John Warrillow:

… and you’ve been kind enough to give your email address. Bryan, it’s been great. I really appreciate your sharing with so much candour. It’s great having you. Thank you.

Bryan Clayton:

I’ve enjoyed it. It’s been a lot of fun.

John Warrillow:

Awesome.

Bryan Clayton:

Have a good day.

 

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